This story was corrected on April 24, 2012. An explanation follows the story.
A struggling Rockville biotech wants to form a new company with an Australian drug-maker in a $54 million deal, but its shareholders might balk, according to analysts.
Nabi Biopharmaceuticals had been considering a sale, merger or liquidation since November, when its smoking vaccine candidate failed to meet its primary endpoint in its second, pivotal phase 3 trial.
Nabi, which had $96.4 million in assets as of Dec. 31, announced plans Monday to merge with Biota Holdings of Melbourne. The deal would create Biota Pharmaceuticals and require $54 million in cash from Nabi, plus issuance of new stock. It would leave Nabi shareholders owning 26 percent of the new company’s stock, while Biota shareholders would own the rest.
The new company’s headquarters would be in the U.S., but officials did not say where.
The deal requires the approval of both companies’ shareholders.
In a Nabi conference call Monday morning, several analysts suggested that stockholders might get more value by simply liquidating Nabi. The company’s liquidation value is about $80 million, according to Nabi CEO Raafat Fahim.
Nabi said it would return to its stockholders its remaining cash in excess of the $54 million, after paying off its debts and other expenses. That would total about $25 million to $30 million, according to Fahim.
Both companies’ stock fell Monday after the announcement, with Biota’s falling 9 percent and Nabi’s down 10.5 percent. Nabi stock closed at $1.66, down from a one-year high of $5.87.
Fahim argued that the deal is in the best interest of both companies’ shareholders and would tie Nabi into Biota’s pipeline.
Biota produces influenza vaccine-related products Relenza, which is licensed to GlaxoSmithKline, and Inavir. The company also has a $231 million contract with the U.S. Biomedical Advanced Research and Development Authority to develop its anti-influenza neuraminidase inhibitor laninamivir in the U.S. Laninamivir already is marketed in Japan.
Nabi’s product development had been focused on the failed NicVax, as well as products for hepatitis and other infectious diseases. Nabi had a 2009 development agreement for NicVax with GlaxoSmithKline of the U.K., worth as much as $500 million. The National Institute on Drug Abuse also had granted Nabi $10 million, including $7.9 million in federal stimulus money, to help develop NicVax.
“This brings in a leading anti-viral program that is well-funded,” Fahim said during Monday’s call. He said Nabi’s directors have unanimously recommended approving the deal.
Shareholders are to vote on it at their next meeting.
Biota sees the merger as a way to access the “larger and deeper” U.S. marketplace, its chairman, Jim Fox, said during his company’s own conference call.
He said the merger is cost-effective and offers a more efficient timetable than any of the more than 40 other companies Biota examined. Biota has been looking to get into the U.S. for a year. The company also plans for a U.S.-based CEO to give it a “direct and more clear connection to the U.S. market,” Fox said.
The new company’s board would include two Nabi directors and six Biota directors.
“This is mostly based around the money,” Fox said, referring to the $54 million from Nabi and potential U.S. investors.
The deal is expected to close in the third quarter, should shareholders approve it.
Nabi ended last year with a $4.5 million net loss, versus a profit of $878,000 in 2010. Revenues fell to $14.8 million from $35 million. It had 16 employees as of Dec. 31, according to a regulatory filing.
Biota reported a net loss of $11 million in the first half of its fiscal year, which ends June 30, compared with a net loss of $15.9 million a year earlier. Revenues fell to $7.8 million from $8.1 million.
The proposed deal is the second involving a Rockville biotech announced in less than a week. On Thursday, Human Genome Sciences reported it rejected GlaxoSmithKline’s unsolicited $2.59 billion takeover offer.
Explanation: The story and secondary headline were corrected to reflect that stock analysts, not stockholders, questioned the transaction in a conference call Monday. Also, Nabi’s estimated liquidation value and amount to be potentially distributed to stockholders were added.